Virus wave, lack of parts hold back German business optimism

April 26, 2021

FRANKFURT, Germany (AP) — A closely watched indicator of German business outlooks barely rose in April as the third wave of coronavirus infections held back optimism about the pace of post-pandemic recovery.

The Ifo index published Monday crept up to 96.8 points from 96.6 points for March as companies viewed current conditions as better but expressed less optimism about the coming six months. Germany, along with the rest of Europe, is going through a renewed battle with higher levels of infections as a variant that spreads more easily has become the dominant strain. More than 5,000 people are in intensive care with COVID-19, the disease caused by the virus.

The Munich-based Ifo institute noted as a compounding factor that some 45% of industrial companies also reported bottlenecks among suppliers, the most since 1991. Auto companies have seen a lack of semi-conductors force them to hold back production. Economists expect a significant rebound toward more normal levels of activity toward the end of the year after vaccination campaigns pick up speed.

“The April Ifo index points to a pause in the German rebound as lockdowns continue,” said Carsten Brzeski, global head of macro at ING bank. “The prospects for a strong rebound in the second half of the year, however, remain valid.”